Las Vegas Sands Corp. Earnings: Will Shareholders Stay Lucky?

Las Vegas Sands (NYSE: LVS) will release its quarterly report on Wednesday, and investors have felt like jackpot winners lately as the stock has climbed to levels not seen since before the financial crisis. Yet even as the company has fared well in its competition against Wynn Resorts (NASDAQ: WYNN) , Melco Crown Entertainment (NASDAQ: MPEL) , and MGM Resorts (NYSE: MGM) , Las Vegas Sands earnings remain potentially vulnerable if a worse-than-anticipated pullback in Asian growth leads to reduced gaming activity there.

Despite its name, Las Vegas Sands has become a play not on the Nevada gaming mecca but rather on the rise of Macau, the Asian center of gaming activity that has blossomed over the past decade. Along with Melco and Wynn, Las Vegas Sands has turned Macau into a key part of its business, and that's why the company is particularly sensitive to concerns about the Chinese economy and its future growth trajectory. Let's take an early look at what's been happening with Las Vegas Sands over the past quarter and what we're likely to see in its report.

Stats on Las Vegas Sands

Analyst EPS Estimate

$0.85

Change From Year-Ago EPS

57%

Revenue Estimate

$3.71 billion

Change From Year-Ago Revenue

21%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Las Vegas Sands earnings make investors winners?Analysts haven't reined in their enthusiasm about Las Vegas Sands earnings in recent months, raising their fourth-quarter estimates by a penny per share and their full-year 2014 projections by $0.08 per share. The stock has risen 2% since late October, having given up double-digit percentage gains in just the past few days.

Las Vegas Sands came into the quarter on a strong note, with third-quarter earnings pointing to continued prosperity. Revenue growth of 32% led to a 78% rise in earnings per share, with Macau-based sales leading the way with 43% growth from the year-ago quarter. Sands also announced a big dividend increase for 2014, with its new dividend of $0.50 per share quarterly helping it keep up with its share-price growth over the past year and keep its yield around 2.5% to 3%.

Yet the big question for Las Vegas Sands is where its future growth will come from. The company has another Macau-based casino that should start operating at some point next year, helping it extend its lead over Wynn, which is still waiting to complete its resort on Macau's Cotai Strip in 2016. Yet Melco Crown has seen similar growth to Sands' in its City of Dreams property, pointing to the ongoing competition for business in Macau.

Source: Las Vegas Sands.

Japan could become an important gaming market that Las Vegas Sands could aim to tap. With Japan aiming to increase international tourism, the success that Sands had with its Marina Bay Sands resort in Singapore could give Japanese officials the impetus they need to eliminate past restrictions on gaming activity and open the door to foreign investment. Moreover, Las Vegas Sands appears to have the inside track to winning any casino bid, given its past experience in Asia. It's also in better financial condition than MGM, which is still working to reduce its debt.

One massive strategic move that Las Vegas Sands made this quarter was to step away from its proposed EuroVegas project in Spain. The company had foreseen spending as much as $30 billion for a Madrid-based casino, but the Spanish government balked at giving Las Vegas Sands some of the assurances it wanted. Given the risks involved with Europe's economy still struggling to regain its balance, putting a stop to EuroVegas will give the company more latitude to take on other growth opportunities.

In the Las Vegas Sands earnings report, watch to see whether the company's reliance on Macau continues. With some analysts pointing to modest gaming revenue increases on the Las Vegas Strip, an improving U.S. economy could give Las Vegas Sands an extra boost at earnings time both this quarter and throughout 2014.

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Several points to consider before you determine that what is happening now in the Chinese economy is going to hurt Sands in Macau:

1. If you look at Macau's annual increases in gross gaming revenues since the economic swoon in 2009, you will notice that it's pretty much been double digit growth, even as China engineered it's "soft landing" in 2012. The industry remains fairly insulated from the mainland economy.

2. Even during the crash of "08/"09, when VIP gaming revenues plummeted, the worst that the "mass markets" encountered in any given quarter was +2% growth.

5. The clear leader in mass-market business in macau is Sands, and Sand's dominant presence on Cotai is not only a mass-market-oriented region of Macau, but it is also a geography that is steadily gaining overall market share from the older, downtown casinos.